Senate panel examining role of GM legal department

Marcy Gordon AP Business Writer

Posted:
07/17/2014 03:30:30 AM EDT

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FILE - In this June 18, 2014 file photo, General Motors CEO Mary Barra testifies on Capitol Hill in Washington. Barra makes her second appearance before a Senate subcommittee investigating the company's handling of a defective ignition switch in small cars on Thursday, July 17, 2014. (AP Photo/Cliff Owen, File)

WASHINGTON (AP) — A Senate panel will pose questions to a new set of key players Thursday as it delves deeper into General Motors' delayed recall of millions of small cars.

GM CEO Mary Barra will certainly be asked about how she's changing a corporate culture that allowed a defect with ignition switches to remain hidden from the car-buying public for 11 years. It will be Barra's second time testifying before the panel.

But Senators at a hearing of the Senate Commerce subcommittee on consumer protection might sling their most pointed questions at GM General Counsel Michael Millikin as they drill down on the role the company's legal department played in the mishandled recall.

An internal investigation led by former federal prosecutor Anton Valukas — paid for by GM — showed that even as GM lawyers recommended the settlement of similar cases involving crashes where front air bags failed to deploy in Chevrolet Cobalts and Saturn Ions, they didn't alert higher-ups, including Millikin, to a potential safety issue.

Lawmakers may also question Valukas about the report's conclusion that a lone engineer, Ray DeGiorgio, was able to approve the use of a switch that didn't meet company specifications, and years later, to order a change to the switch without any senior executives at GM being aware.

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Sen. Richard Blumenthal, D-Conn., a Senate subcommittee member who has criticized the Valukas findings as "the best report money can buy," says he'll ask Valukas at the hearing "why they failed to go beyond the low-level management and engineers."

Also testifying will be Rodney O'Neal, the CEO and president of Delphi. His company manufactured the ignition switches. Compensation expert Kenneth Feinberg will testify about the plan he recently unveiled for compensating victims of crashes caused by the faulty switches.

Some other questions senators may ask:

BARRA

—Q: How does GM plan to change the corporate culture exposed by Valukas's report? In light of the revelations, was the termination of 15 employees sufficient?

Valukas's investigation found a dysfunctional culture in which people didn't take responsibility for fixing problems. Barra has said that GM has restructured its process for making safety decisions, elevating it to the company's highest levels.

Senators also may have more questions on how much Barra knew about the problem with the ignition switches when she was GM product development chief.

MILLIKIN

—Q: What role did the company's legal department play in the delayed recall?

GM attorneys signed settlements with families of some crash victims in cases where the switch defects figured. Blumenthal said in an interview he wants to know, "Why did GM insist on keeping the settlements secret?"

O'NEAL

—Q: Why did Delphi send GM the switches even when its own tests showed that the force needed to turn them didn't meet GM's specifications?

Delphi, once a GM division, didn't allow Valukas's investigators to interview its employees and turned over a limited number of documents.

Senators likely will ask O'Neal whether Delphi should have notified GM higher-ups after DeGiorgio approved the out-of-spec switches. DeGiorgio also told Delphi to alter the switches in 2006 but not change the part number, making the change hard to track. That raises the question of why Delphi agreed to keep the part number the same.

Panel members will want to know when Delphi found out that the switches began causing fatal crashes, and why the company continued to provide them to GM after knowing about the deaths.

FEINBERG

—Q: Should the compensation program be extended to victims of crashes involving cars that GM recalled on June 30 — mainly older, midsize vehicles where ignition keys are the issue rather than switches?

Feinberg has presided over compensation plans for the victims of the Sept. 11 terrorist attacks, the 2010 BP oil spill in the Gulf of Mexico and other disasters. He has said GM placed no limit on what it will pay for crashes caused by faulty ignition switches. Victims of the June 30 recalls, affecting 8.2 million cars, can't file claims to the fund.

In the original recall, the ignition switches didn't meet GM's specifications but were used anyway, and they slipped too easily out of the "run" position.

The vehicles recalled last month have switches that do conform to GM's specifications. In these cases, the keys can move the ignition out of position because of jarring, bumps from the driver's knee or the weight of a heavy key chain, GM says. The recalled cars will get replacement keys. The 2.6 million small cars recalled in February are getting new ignitions.

VALUKAS

—Q: Do the actions that GM has taken so far appear sufficient to prevent the problem from happening again?

Valukas has acknowledged that his report leaves open some questions, notably whether there was civil and criminal culpability; whether GM will make the right decisions to stop this from happening again; and what specific crashes were caused by the ignition switch problem.

Skepticism from senators over Valukas's "lone engineer" finding can be expected to be thick.

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